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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _________ TO _______.
Commission file number: 1-12431
UNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-3282551
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification)
64 Old Highway 22, Clinton, New Jersey 08809
(Address of principal executive offices) (zip code)
(908)730-7630
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES NO X
The number of shares outstanding of each of the registrant's classes of
common stock, as of February 25, 1997: Common Stock, No Par Value:
1,973,425 shares outstanding.
Transitional Small Business Disclosure Format (check one): YES NO X
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1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
UNITY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(unaudited) 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks .......................................... $ 17,658,906 $ 17,064,858
Federal funds sold ............................................... 9,900,000 7,625,000
------------ ------------
Total cash and cash equivalents ................. 27,558,906 24,689,858
------------ ------------
Securities
Available for sale (at market value) .................... 13,939,417 16,304,282
Held to maturity (aggregate market value of
$20,212,160 and $19,264,315) .......................... 21,091,434 19,856,743
------------ ------------
35,030,851 36,161,025
------------ ------------
Loans (including loans held for sale of $3,532,058 and $3,515,561) 90,083,440 59,108,042
Less: Unearned income .................................. 18,366 49,278
Allowance for possible loan losses ........... 881,421 561,931
------------ ------------
Net loans .................................... 89,183,653 58,496,833
------------ ------------
Premises and equipment, net ...................................... 2,650,611 1,094,043
Accrued interest receivable ...................................... 906,104 858,060
Other assets ..................................................... 1,157,463 504,221
------------ ------------
Total assets .................................... $156,487,588 $121,804,040
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand
Noninterest Bearing ............................. $ 28,280,026 $ 18,662,191
Interest bearing ................................ 20,974,556 19,345,467
Savings ................................................. 23,351,569 22,202,038
Time (includes deposits $100,000 and over of $10,916,000
and $6,706,000) ....................................... 70,428,939 50,787,928
------------ ------------
Total deposits .................................. 143,035,090 110,997,624
------------ ------------
Subordinated debt ................................................ 0 1,510,000
Accrued interest payable ......................................... 519,519 391,525
Accrued expenses and other liabilities ........................... 594,357 428,482
------------ ------------
Total liabilities ............................... 144,148,966 113,327,631
------------ ------------
Commitments and contingencies Shareholders' Equity
Common stock, no par value, 2,500,000 shares authorized;
1,562,740 and 1,204,560 issued and outstanding .. 11,472,714 7,371,889
Retained earnings ....................................... 941,498 1,070,573
Net unrealized loss on available for sale securities .... (75,590) 33,947
------------ ------------
Total Shareholders' Equity ...................... 12,338,622 8,476,409
------------ ------------
Total liabilities and Shareholders' Equity ...... $156,487,588 $121,804,040
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
2
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
Interest Income 1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Interest on loans ............................. $2,036,399 $ 1,292,951 $5,523,077 $3,381,804
Interest on Securities ........................ 644,871 698,056 1,933,748 1,975,850
Interest on Federal Funds Sold ................ 145,624 84,716 319,468 178,707
---------- ----------- ---------- ----------
Total interest income ......................... 2,826,894 2,075,723 7,776,293 5,536,361
---------- ----------- ---------- ----------
Interest expense ....................................... 1,234,234 911,243 3,311,162 2,206,138
Interest on long term debt ............................. 34,723 34,040 93,934 89,204
---------- ----------- ---------- ----------
Total interest expense ................................. 1,268,957 945,283 3,405,096 2,295,342
---------- ----------- ---------- ----------
Net interest income .................................... 1,557,937 1,130,440 4,371,197 3,241,019
---------- ----------- ---------- ----------
Provision for possible loan losses ..................... 107,790 44,476 365,078 189,881
---------- ----------- ---------- ----------
Net interest income after provision for possible
loan losses .......................................... 1,450,147 1,085,964 4,006,119 3,051,138
---------- ----------- ---------- ----------
Other income
Service charges on deposits ................... 134,864 85,608 358,585 221,760
Gain on sale of loans ......................... 450,058 283,433 1,067,669 653,558
Gain on sale of securities .................... 1 (18,999) 31,851 (18,999)
Other income .................................. 98,459 57,848 275,481 176,312
---------- ----------- ---------- ----------
Total other income ............................ 683,382 407,890 1,733,586 1,032,631
---------- ----------- ---------- ----------
Other expenses
Salaries and employee benefits ................ 725,954 503,174 2,020,451 1,376,962
Occupancy expense ............................. 221,199 69,339 549,367 163,677
Other operating expenses ...................... 619,757 443,329 1,788,354 1,251,559
SAIF Special Assessment ....................... 370,141 0 370,141 0
---------- ----------- ---------- ----------
Total other expenses .......................... 1,937,051 1,015,842 4,728,313 2,792,198
---------- ----------- ---------- ----------
Income before taxes .................................... 196,478 478,012 1,011,392 1,291,571
Provision for income taxes ............................. 69,741 178,772 382,036 491,403
---------- ----------- ---------- ----------
Net income ............................................. $ 126,737 $ 299,240 $ 629,356 $ 800,168
========== =========== ========== ==========
Net income per share ................................... $ 0.09 $ 0.25 $ 0.47 $ 0.66
Weighted average shares outstanding .................... 1,394,571 1,204,560 1,347,678 1,203,509
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements
3
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flow (Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30 1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net income .......................................................... $ 629,356 $ 800,168
Adjustments to reconcile net income to net cash provided by
(used in) operating activities
Provision for possible loan losses .......................... 358,585 221,760
Depreciation and amortization ............................... 203,142 148,863
Gain on sale of premises and equipment ...................... 0 (1,033)
(Gain) loss on sale of securities ........................... (31,851) 18,999
Gain on sale of loans ....................................... (1,067,669) (653,558)
Amortization of securities premiums, net .................... 43,343 33,737
Increase in accrued interest receivable ..................... (48,044) (82,821)
Increase in other assets .................................... (653,242) (198,162)
Increase in accrued interest payable ........................ 127,994 206,103
Increase (decrease) in accrued expenses and other liabilities 238,905 (10,392)
------------ ------------
Net cash (used in) provided by operating activities .... (199,481) 483,664
------------ ------------
Investing activities:
Proceeds from sales of securities available for sale ................ 1,234,436 501,779
Purchases of securities held to maturity ............................ (2,006,172) (5,872,806)
Purchases of securities available for sale .......................... (8,448,191) (237,700)
Maturities and principal payments on securities held to maturity .... 772,404 7,910,528
Maturities and principal payments on securities available for sale .. 9,383,639 253,671
Proceeds from sale of loans ......................................... 11,505,862 8,314,346
Net increase in loans ............................................... (41,483,598) (21,360,050)
Capital Expenditures ................................................ (1,759,710) (346,588)
Proceeds from sale of premises and equipment ........................ 0 9,500
------------ ------------
Net cash used in investing activities ....................... (30,801,329) (10,827,320)
------------ ------------
Financing activities:
Increase in deposits ................................................ 32,037,466 27,329,311
Proceeds from issuance of subordinated debt ......................... 2,010,000 1,510,000
Proceeds from issuance of common stock, net ......................... 0 20,000
Other ............................................................... 8,187
Cash Dividends ...................................................... (185,794) (183,306)
Net cash provided by financing activities ................ 33,869,859 28,676,005
(Decrease) increase in cash and cash equivalents ......................... 2,869,048 18,332,349
Cash and cash equivalents at beginning of year ........................... 24,689,858 10,084,689
------------ ------------
Cash and cash equivalents at end of year ................................. $ 27,558,906 $ 28,417,038
------------ ------------
Supplemental disclosures:
Interest paid ....................................................... $ 3,183,169 $ 2,000,035
Income taxes paid ................................................... 965,000 474,000
Subordinated debt exchanged for common stock ........................ 3,520,000 0
------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. The accompanying consolidated financial statements of Unity Bancorp Inc.
(the "Company") and its subsidiary, First Community Bank (the "Bank"),
reflect all adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation of interim results. The
financial information has been prepared in accordance with the Company's
customary accounting practices and has not been audited.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted pursuant to
the SEC rules and regulations. These interim financial statements should
be read in conjunction with the Company's consolidated financial
statements and notes thereto for the year ended December 31, 1995.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the year.
2. Securities:
Information with regard to the Company's securities portfolio at
September 30, 1996 is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 1996 GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- --------- ---------- ------------
<S> <C> <C> <C> <C>
HELD TO MATURITY
Obligations of U.S. Government agencies $ 7,267,698 $27,805 $ (53,464) $ 7,242,039
U.S. Government sponsored agencies 4,991,144 0 (608,019) 4,383,125
Mortgage-backed securities 8,337,935 23,068 (272,052) 8,088,951
Corporate debt securities 494,660 3,385 0 498,045
----------- ------- --------- -----------
TOTAL HELD TO MATURITY $21,091,437 $54,258 $(933,535) $20,212,160
=========== ======= ========= ===========
AVAILABLE FOR SALE
U.S. Treasury securities $ 950,992 $ 2,197 $ 0 $ 953,189
U.S. Government sponsored agencies 9,655,140 18,469 (65,223) 9,608,386
Obligations of states and political subdivisions 873,750 858 (650) 873,958
Mortgage-backed securities 109,194 55 0 109,249
Corporate debt securities 2,031,229 1,322 (916) 2,031,635
FHLB stock 363,000 0 0 363,000
----------- ------- --------- -----------
TOTAL AVAILABLE FOR SALE $13,983,305 $22,901 $ (66,789) $13,939,417
=========== ======= ========= ===========
</TABLE>
5
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
The amortized cost and estimated market value of securities at September
30, 1996, by contractual maturity, are shown below:
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------- ------------
Held to maturity
Due after 1 year - 5 years $ 2,735,804 $ 2,735,858
Due after 5 years - 10 Years 1,500,000 1,312,500
Due after 10 years 8,517,698 8,074,851
Mortgage-backed securities 8,337,935 8,088,951
----------- -----------
$21,091,437 $20,212,160
=========== ===========
Available for sale
Due under 1 year $ 6,028,305 $ 6,042,393
Due after 1 year - 5 years 7,482,806 7,424,774
FHLB Stock 363,000 363,000
Mortgage-backed securities 109,194 109,250
----------- -----------
$13,983,305 $13,939,417
=========== ===========
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties.
Proceeds from sales of securities were $1,234,436 as of September 30,
1996, gross gains on the sales of securities were $31,851.
Securities with carrying values aggregating $400,000 were pledged to
secure public deposits at September 30, 1996.
3. Loans:
Loans outstanding by classification as of September 30, 1996 are as
follows:
SEPTEMBER 30,
1996
-----------
Loans secured by real estate-
Residential properties $24,307,238
Nonresidential properties 37,360,021
Construction loans 7,812,763
Commercial and industrial loans 14,397,243
Lease financing receivables 57,201
Loans to individuals 6,148,974
-----------
$90,083,440
===========
6
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
As of September 30, 1996, loans accounted for on a nonaccrual basis
amounted to approximately $929,000. The interest income that would have
been recorded had these loans performed under the original contract terms
was $36,102 for the nine months ended September 30, 1996. At September 30,
1996, $1,240,000 in loans were past due greater than 90 days but still
accruing interest.
As of September 30, 1996, the Bank's recorded investment in impaired
loans, defined as nonaccrual loans, was $929,000 and the related valuation
allowance was $81,800. This valuation allowance is included in the
allowance for possible loan losses in the accompanying statement of
condition.
As of September 30, 1996, approximately 77% of the Company's loans were
secured by real estate. As such, a substantial portion of the Company's
borrowers' ability to repay their loans is dependent on the economic
environment of the real estate industry in the Company's market area.
In the ordinary course of business, the Company may extend credit to
officers, directors or their associates. These loans are subject to the
Company's normal lending policy. An analysis of such loans, all of which
are current as to principal and interest payments, is as follows:
Balance at December 31, 1995 $ 3,953,574
New Loans 4,039,856
Repayments (3,725,549)
------------
Balance at September 30, 1996 $ 4,267,881
============
4. Allowance for Possible Loan Losses:
The allowance for possible loan losses is based on estimates and ultimate
losses may vary from current estimates. These estimates are reviewed
periodically and, as adjustments become known, they are reflected in
operations in the periods in which they become known.
An analysis of the change in the allowance for possible loan losses during
1996, is as follows:
SEPTEMBER 30,
1996
Balance at beginning of year $ 561,931
Provision charged to expense 365,078
Loans charged-off (45,588)
Recoveries on loans previously charged off 0
------------
Balance at end of period $ 881,421
============
5. Shareholders' Equity:
At December 31, 1995, the Company had $1,510,000 in subordinated notes
outstanding. In February of 1996, these notes were redeemed through an
exchange of common stock at an exchange
7
<PAGE>
Item 1. Financial Statements (continued)
UNITY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
rate of $12.00 per share. In March the Company issued an additional
$2,010,000 of subordinated debt. In September, these notes were redeemed
through an exchange of common stock at an exchange rate of $12.50 per
share. The aggregate effect of retiring this debt was an increase to
capital of approximately $3,520,000.
6. Premises and Equipment:
The detail of premises and equipment as of September 30, 1996 is as
follows:
SEPTEMBER 30,
$ 1996
Land and building 631,966
Furniture, fixtures and equipment 1,392,225
Leasehold improvements 1,216,314
-------------
3,240,506
Less-Accumulated depreciation and amortization (589,895)
-------------
$ 2,650,611
=============
Additions to premises and equipment for the nine months ended September
30, 1996 totaled $1,760,000 which was primarily attributable to the
relocation of the Bank's main office and the consolidation of the
Company's administrative headquarters to a 18,000 square feet leased
facility located in Clinton, NJ.
8
<PAGE>
Item 2. Management's Discussion and Analysis
UNITY BANCORP, INC. AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
This financial review presents management's discussion and analysis of the
Company's financial condition and results of operations. It should be read
in conjunction with the consolidated condensed financial statements and
the accompanying notes.
FINANCIAL CONDITION AT SEPTEMBER 30, 1996
The Company's total assets increased to $156.5 million at September 30,
1996, an increase of $34.7 million, or 28.5%, over total assets at
December 31, 1995. Total loans, net increased by 52.5%, to $89.2 million
from $58.5 million at December 31, 1995. The Company's securities
portfolio, including securities held for maturity and securities available
for sale, totaled $35.0 million at September 30, 1996, a decrease of $1.1
million from total securities at December 31, 1995. The decrease in
securities was the result of a decrease of $2.4 million, or 14.5%, in the
Company's securities available for sale. Shareholders' equity increased to
$12.4 million at September 30, 1996 from $8.5 million at December 31,
1995, an increase of 45.6%, or $3.9 million. The growth in the Company's
total assets and loans receivable and deposits was the result of the
Company's expansion through new branches and its continued penetration of
its existing markets, its emphasis on customer service, its competitive
rate structures and selective marketing. The increase in the Company's
shareholders' equity was primarily attributable to the Company's exchanges
in February and September of 1996 of an aggregate of $3.5 million in
subordinated debt for shares of its common stock. The subordinated debt,
held by affiliates of the Company and its subsidiary, was exchanged for
358,276 shares of the Company's common stock.
The Company's total deposits increased to $143.0 million at September 30,
1996, an increase of $32.0 million, or 28.9%, over total deposits of
$111.0 million at December 31, 1995. Time deposits increased by $19.6
million, or 38.7% and non-interest bearing demand deposits increased by
$9.6 million, or 51.1%. The increase in time deposits was primarily caused
by the company's promotional activities at its new locations, as well as
the Company's continued penetration of its existing markets. In connection
with the opening of its new branches, the Company offered time deposit
products with higher rates of interest than those available in the
surrounding market. As of September 30, 1996 the average maturity of these
new accounts is 12 months. It has been management's experience that a
large percentage of these accounts renew or are invested in other Company
deposit accounts when the account matures. The increase in the Company's
non-interest bearing deposit accounts reflects the Company's increased
loan volume, as the amount of non-interest bearing deposits is effected by
timing differentials between the funding of loans and the use of loan
proceeds by borrowers.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995
Net Income
For the nine months ended September 30, 1996, the Company earned net
income of $629 thousand, a decrease from the $800 thousand earned for the
comparable period of 1995 of 21.3%, or $171 thousand. Income for the nine
months ended September 30, 1996 was adversely affected by the Company's
payment of
9
<PAGE>
Item 2. Management's Discussion and Analysis (continued)
a one time assessment of $370 thousand in connection with the
recapitalization of the SAIF. Absent this one time assessment, the
Company's net income would have increased by $52 thousand, or 6.4%, over
net income for the comparable period of 1995. In addition, net income was
adversely effected by an increase of $558 thousand in non-interest expense
as the Company continued its expansion.
Net Interest Income
The Company's interest income increased by $2.2 million, or 40.5%, to $7.8
million for the nine months ended September 30, 1996 from $5.5 million for
the comparable period of 1995. The increase resulted from an increase in
the Company's earning assets as discussed above, partially offset by a
reduction in yield as the Company's variable rate loans repriced to lower
current market rates. Interest expense increased by $1.1 million, or
48.3%, to $3.4 million for the nine months ended September 30, 1996 from
$2.3 million for the comparable period of 1995. This increase in interest
expense was primarily attributable to the increase in the Company's total
deposits discussed above and the change in the composition of the
Company's deposits, as a greater percentage of the Company's deposits were
in time deposits, which generally pay higher rates of interest. As
interest expense increased more rapidly than interest income, the Company
experienced a reduction in its net interest margin from 4.88% for the nine
months ended September 30, 1995 to 4.46% for the nine months ended
September 30, 1996.
Provision for Loan Losses
The Company's provision for loan losses increased by $175 thousand to $365
thousand for the nine months ended September 30, 1996 from $190 thousand
for the comparable period of 1995. This increase in the provision for loan
losses reflects the increased size of the Company's total loan portfolio
from September 30, 1995 to September 30, 1996.
Non-Interest Income
The Company's gain on sale of loans increased by $414 thousand to $1.1
million for the nine months ended September 30, 1996 from $654 thousand
for the comparable period of 1995. This increase in the gain on sale of
loans reflects the Company's increased participation in the Small Business
Administration's ("SBA") guaranteed loan program as the Company has been
designated a "preferred lender" for the States of New Jersey, Delaware,
New York and Pennsylvania. Under the SBA program, the SBA guarantees up to
90% of the principal of a qualifying loan. The Company then sells the
guaranteed portion of the loan into the secondary market.
Non-Interest Expense
The Company's other expenses increased by $1.6 million, or 56.1%, to $4.4
million for the nine months ended September 30, 1996 from $2.8 million for
the comparable period of 1995. Increases include increase in salary and
employee benefits of $643 thousand, occupancy expense of $386 thousand and
other operating expense of $537 thousand. The increases in employee
benefits, occupancy and other operating expenses were primarily
attributable to the company's continued expansion, as the Company opened
another branch during the 1996 period. In addition, the Company moved into
its new headquarters building in March 1996. Other expense also increased
during the nine months ended September 30, 1996 due to the one-time
special assessment imposed by the FDIC to recapitalize the Savings
Association Insurance Fund, which insures the Bank's deposits. The
recapitalization has led to reduced insurance premiums for the Company, as
the FDIC has adopted a new premium assessment schedule under which the
highest rated institutions will pay only a $2,000 annual assessment and
other institutions will pay premiums of up to 27 basis points of assessed
deposits.
10
<PAGE>
Item 2. Management's Discussion and Analysis (continued)
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995
Net Income
For the three months ended September 30, 1996, the Company earned net
income of $127 thousand, a decrease from the $299 thousand earned for the
comparable period of 1995 of 57.6%, or $173 thousand. Income for the three
months ended September 30, 1996 was adversely affected by the Company's
payment of a one time assessment of $370 thousand in connection with the
recapitalization of the SAIF. Absent this one time assessment, the
Company's net income would have increased by $50 thousand, or 16.5%, over
net income for the comparable period of 1995. In addition, net income was
adversely effected by an increase of $1.6 million in non-interest expense
as the Company continued its expansion.
Net Interest Income
The Company's interest income increased by $751 thousand, or 36.2%, to
$2.8 million for the three months ended September 30, 1996 from $2.1
million for the comparable period of 1995. The increase resulted from an
increase in the Company's earning assets as discussed above, partially
offset by a reduction in yield as the Company's variable rate loans
repriced to lower current market rates. Interest expense increased by $427
thousand, or 37.8%, to $1.5 million for the three months ended September
30, 1996 from $1.1 million for the comparable period of 1995. This
increase in interest expense was primarily attributable to the increase in
the Company's total deposits discussed above and the change in the
composition of the Company's deposits, as a greater percentage of the
Company's deposits were in time deposits, which generally pay higher rates
of interest. As interest expense increased more rapidly than interest
income, the Company experienced a reduction in its net interest margin
from 4.47% for the three months ended September 30, 1995 to 4.29% for the
three months ended September 30, 1996.
Provision for Loan Losses
The Company's provision for loan losses increased by $63 thousand to $108
thousand for the three months ended September 30, 1996 from $44 thousand
for the comparable period of 1995. This increase in the provision for loan
losses reflects the increased size of the Company's total loan portfolio
from September 30, 1995 to September 30, 1996.
Non-Interest Income
The Company's gain on sale of loans increased by $167 thousand to $450
thousand for the three months ended September 30, 1996 from $283 thousand
for the comparable period of 1995. This increase in the gain on sale of
loans reflects the Company's increased participation in the Small Business
Administration's ("SBA") guaranteed loan program as the Company has been
designated a "preferred lender" for the States of New Jersey, Delaware,
New York and Pennsylvania. Under the SBA program, the SBA guarantees up to
90% of the principal of a qualifying loan. The Company then sells the
guaranteed portion of the loan into the secondary market.
Non-Interest Expense
The Company's other expenses increased by $921 thousand, or 90.7%, to $1.9
million for the three months ended September 30, 1996 from $1.0 million
for the comparable period of 1995. Increases include increase in salary
and employee benefits of $223 thousand, occupancy expense of $152 thousand
and other operating expense of $176 thousand. The increases in employee
benefits, occupancy and other operating
11
<PAGE>
Item 2. Management's Discussion and Analysis (continued)
expenses were primarily attributable to the company's continued expansion,
as the Company opened another branch on July 8, 1996. In addition, the
Company moved into its new headquarters building in March 1996. Other
expense also increased during the three months ended September 30, 1996
due to the one-time special assessment imposed by the FDIC to recapitalize
the Savings Association Insurance Fund, which insures the Bank's deposits.
The recapitalization has led to reduced insurance premiums for the
Company, as the FDIC has adopted a new premium assessment schedule under
which the highest rated institutions will pay only a $2,000 annual
assessment and other institutions will pay premiums of up to 27 basis
points of assessed deposits.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and lawsuits in which the Company is periodically
involved incidental to the Bank's business. In the opinion of management, no
material loss is expected from any such pending claims or lawsuits.
Item 2. Change in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
On December 13, 1996, the Registrant completed its initial public offering of
401,500 units. Each unit consists of one share of common stock and one common
stock purchase warrant entitling the holder thereof to purchase the share of
stock at $15.75. The Registrant raised proceeds of $5,385,165 through the
offering, net of expenses.
On January 13, 1997, the Registrant's common stock began trading on the American
Stock Exchange under the Symbol "UBI."
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number 27.
Description - Financial Data Schedule
(b) None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITY BANCORP, INC.
Date: February 25, 1997 By: JAMES HYMAN
-------------------------
James Hyman,
President and Chief
Operating Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
registrants Unaudited September 30, 1996 interim financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,814,863
<INT-BEARING-DEPOSITS> 13,844,043
<FED-FUNDS-SOLD> 9,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,939,417
<INVESTMENTS-CARRYING> 21,091,434
<INVESTMENTS-MARKET> 20,212,160
<LOANS> 90,083,440
<ALLOWANCE> 881,421
<TOTAL-ASSETS> 156,487,588
<DEPOSITS> 143,035,090
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,113,876
<LONG-TERM> 0
0
0
<COMMON> 11,472,714
<OTHER-SE> 865,908
<TOTAL-LIABILITIES-AND-EQUITY> 156,487,588
<INTEREST-LOAN> 5,523,077
<INTEREST-INVEST> 1,933,748
<INTEREST-OTHER> 319,468
<INTEREST-TOTAL> 7,776,293
<INTEREST-DEPOSIT> 3,311,162
<INTEREST-EXPENSE> 3,405,096
<INTEREST-INCOME-NET> 4,371,197
<LOAN-LOSSES> 365,078
<SECURITIES-GAINS> 31,851
<EXPENSE-OTHER> 4,728,313
<INCOME-PRETAX> 1,011,392
<INCOME-PRE-EXTRAORDINARY> 1,011,392
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 629,356
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 4.46
<LOANS-NON> 929,000
<LOANS-PAST> 1,240,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 561,931
<CHARGE-OFFS> 45,888
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 881,421
<ALLOWANCE-DOMESTIC> 881,421
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
